Progressive legislators on Beacon Hill never imagined they’d find a political ally in Governor Mitt Romney. After all, in dealing with the fiscal crisis the Republican leader has taken aim at core state services, while vowing not to raise taxes. But Romney took a step toward the kind of equitable tax system that progressives want when he included two proposals meant to close corporate-tax loopholes in his fiscal year (FY) 2003 supplemental budget on January 30. Last Thursday, the Senate, following a similar move by the House of Representatives on February 5, passed both provisions as part of its own budget package.

The move has delighted progressive pols. " I’m impressed that the governor went after some significant loopholes, " says State Representative Jim Marzilli (D-Arlington). Marzilli is one of about a dozen legislators who have filed 10 corporate-tax-related bills drafted by the Massachusetts Budget and Policy Center (MBPC), a liberal think tank in Boston (see " Justice Undeferred, " News and Features, February 7). What Romney did was not only " aggressive, " Marzilli adds, but " extraordinary. "

Indeed, one of Romney’s proposals mirrors a pending MBPC bill that would ban what’s known as " passive-investment corporations, " or PICs. The legislation, which still has to be assigned to a legislative committee, would prevent corporations from avoiding Massachusetts taxes by transferring their intellectual property to subsidiaries in no-tax jurisdictions. On February 13, the Senate approved a bill to close the estimated $650 million budget shortfall this fiscal year — and struck down the PIC loophole. The Senate and House budget-balancing measures will now go to a joint conference committee, which will iron out the differences. If the current language makes its way to the governor’s desk, the pending PIC bill would, in effect, become unnecessary. In other words, progressive legislators could thank Romney for their speedy victory. Says State Representative Ruth Balser (D-Newton), a bill co-sponsor, " This is really good news. The governor and House [and Senate] leadership have passed legislation that will ensure that corporations pay their fair share. "

The PIC proposal, which would close one of the most egregious loopholes around, augurs more movement on the corporate-tax front. Corporations rely on countless methods to shift income and avoid taxation. Liberal representatives and senators are now considering whether to file a measure that would mandate " combined reporting, " which would require Massachusetts businesses to list all profits realized for all their subsidiaries when figuring out their state income tax. " What we’ve seen is an important first step, " says MBPC executive director Noah Berger, " but we need to continue to close corporate-tax loopholes in a more comprehensive way. "

In the meantime, legislators will try to build support for the nine remaining MBPC bills pending at the State House — which are far more likely to pass given Romney’s and the legislative leadership’s apparent desire to solve the PIC problem. As Marzilli concludes, " That this provision was included in the budget is a sign that legislators are willing to examine areas that had previously been considered off-limits. It’s long overdue. "